How do we assess the economic efficiency of mesotunnels? An economist’s take

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Content Author:
Nieyan Cheng

By Nieyan Cheng, Ph.D. Student,  Department of Economics, Iowa State University; and Wendong Zhang, Assistant Professor and Extension Economist, Department of Economics and CARD, Iowa State University.

 

When hearing about a new agricultural technology, you may wonder whether it makes economic sense and whether it could fit into your farming operation.

For organic growers of cucurbit crops, new technology should not only provide technical solutions but also be cost-efficient and profit-improving. Our project is testing some new approaches to control a complex of insect pests and diseases in organic production of cucurbit crops, with a special focus on muskmelon and winter squash.

Mesotunnels are one of these new approaches. Our previous blog posts discussed how mesotunnels works for organic cucurbit production. But we need to know if and when mesotunnels are economically attractive for growers. One part of mesotunnel row cover research cooperated by Iowa State University, University of Kentucky, and Cornell University is seeking to answer this question.

Mesotunnels differ from low tunnel in that they use a breathable nylon-mesh fabric covering instead of spun-bonded polypropylene fabric covering. Mesotunnels are also taller, roughly 36-42 inches high, and conduit hoops rather than wires are used for support. More workers are needed to set up mesotunnels than low tunnels. On the other hand, the nylon-mesh fabric is tougher and longer-lasting than spun-bonded polypropylene, and our preliminary data indicate that fewer insecticide sprays are needed with mesotunnels than with low tunnels. These differences all have economic consequences.  How can we say that changing from low tunnels to mesotunnels is more economically efficient? This is where partial budget analysis comes in!

To put together a partial budget, we don’t need all of the cost items in the production process. What matters is the cost items that differ between mesotunnels and low tunnels. For example, vegetable seeds are not included while the fabric coverings, insecticide sprays, and bumblebee hives (used in some mesotunnel trials) are included. Mesotunnels may also change the labor hours. For items that could be used multiple years, we use a measure called the Equivalent Annual Cost to convert the total cost with a yearly number to account for both the purchase cost and the life expectancy of the material. We collect information on the key cost items, as well as the marketable yield. Then we’re ready for the economic analysis.

One yardstick we use is called the Relative Cost Efficiency Ratio, which is the marketable yield per dollar cost to produce a specific crop in a specific system – for example, organic acorn squash in a mesotunnel system -  divided by the yield per dollar cost in a low tunnel system. If this ratio is greater than one, mesotunnels are more cost-efficient relative to low tunnels.

How do calculations based on small-scale university trials apply to your farm?   It’s often true than economies of scale (and dollar savings) can be achieved when moving up from small plots to commercial-size plots.

To compensate for this plot-size disparity, we will also calculate the relative cost-efficiency ratio for alternative field sizes ranging from 1 acre to 50 acres to evaluate the relationship between economic efficiency and production scale. To do this, we need to make some assumptions. For example, one bumble bee hive can pollinate more acorn squash flowers in a larger plot than in a smaller plot. These projections are based on experience and expert knowledge from our project team and advisory panel growers. We will also estimate how cost efficiency varies from a high-pest-pressure year to a low-pressure year, and whether economic efficiency differs among the three states in the project (New York, Kentucky, and Iowa). 

Growers need sound information to make informed decisions, and we hope our economic efficiency analysis will provide this critical information for mesotunnel technology.